FMC Questions 8 Ocean Carriers About Surcharges

The Federal Maritime Commission's Bureau of Enforcement (BoE) is giving eight ocean carriers until August 13, 2021, to provide details that confirm any surcharges were instituted properly and in accordance with legal and regulatory obligations.

The companies contacted are CMA CGM, Hapag-Lloyd, HMM, Matson, MSC, OOCL, SM Line; and Zim. Each ocean carrier was identified as having recently implemented or announced congestion or related surcharges.

The FMC has launched an expedited inquiry into the timing and legal sufficiency of ocean carrier practices with respect to certain surcharges. The BoE wants the ocean carriers to provide details about congestion or related surcharges they have implemented or announced.

This action was taken in response to communications received by the Commission from multiple parties reporting that ocean carriers are improperly implementing surcharges.

Ocean carriers are subject to specific requirements related to tariff changes or rate increases, including providing a 30-day notice to shippers and ensuring that published tariffs are clear and definite.

In reviewing ocean carrier responses, the Commission will determine if surcharges were implemented following proper notice; if the purpose of the surcharge was clearly defined; if it is clear what event or condition triggers the surcharge; and is it clear what event or condition has been identified that would terminate the surcharge. The Commission can initiate enforcement actions for improperly established tariffs.

“The COVID-related spike in demand for imports has pushed cargo rates to record highs,” said Chairman Maffei. “Now, we hear increasing reports of ocean carriers assessing new additional fees, such as ‘congestion surcharges,’ with little notice or explanation.”

“The congestion is due mostly to the tremendous volume of traffic coming from ocean carriers and through ports to satisfy the record demand for imports. Far from being a sudden occurrence or isolated to a port or geographical area, congestion of the freight transportation system is everywhere and has been going on for many months. It seems to me that these factors would already have been included into the record high rates charged by the carriers. As Chairman, I want to know the carriers’ justifications for additional fees and I strongly support close scrutiny by the FMC’s Bureau of Enforcement aimed at stopping any instance where these add-on fees may not fully comply with the law or regulation,” concluded Chairman Maffei.

FMC Hears Proposals Addressing Supply Chain and Cruise Issues

Recommendations to address ongoing port and supply chain congestion, and proposed changes to agency regulations related to refunds for cancelled cruise ship voyages, were topics addressed during the open session of a Federal Maritime Commission meeting held July 28, 2021.

Commissioner Rebecca F. Dye provided the Commission with Interim Recommendations to address current conditions contributing to inefficiencies and congestion in the freight delivery system due to impacts associated with the ongoing COVID-19 pandemic. Commissioner Dye, who serves as the Fact Finding Officer for Fact Finding 29, presented a set of eight Interim Recommendations for actions the FMC can take to address many of the most common problems she has identified through her work. The recommendations are aimed at minimizing barriers to private party enforcement of the Shipping Act, clarifying Commission and industry processes, encouraging shippers, truckers, and other stakeholders to assist Commission enforcement efforts, and bolstering the ability of the Office of Consumer Affairs and Dispute Resolution Services to facilitate fair and fast dispute resolution. Commissioner Dye also reported that she plans to hold meetings of Supply Chain Innovation Teams in Memphis and the Port of Los Angeles to address supply chain disruptions and increase supply chain visibility.

Commissioner Carl W. Bentzel provided a summary of his examination of container and chassis manufacturing and the availability of intermodal equipment to support US international containerized trade. The Commissioner noted that congestion and increased demand for equipment has led to shortages of chassis and containers in the United States and other nations as well. This demand has led to increased prices for new intermodal equipment. Commissioner Bentzel plans on completing his work by September.

The final item covered in the open session of the meeting Commission was a briefing by staff on proposed changes to agency regulations governing “non-performance” of transportation by Passenger Vessel Operators and circumstances under which cruise passengers can receive refunds for cancelled voyages. The Commission is contemplating a slate of amendments that will establish a new definition of “non-performance”, changing how cruise lines treat unearned passenger revenue and establishing a new process for obtaining refunds. The Commission will vote on this matter at a later date.

The Commission received in closed session an update on an agency investigation into Conditions Created by Canadian Ballast Water Regulations in the U.S./Canada Great Lakes Trade.

FMC Issues Interim Report Examining Impacts to Eastern Seaboard

Commissioner Louis E. Sola, in a report, noted that the challenges being posed by the current pandemic on the cruise activity along the U.S. eastern seaboard are fluid and not easily met "Although the lower spring COVID-19 cases in the U.S. and increasing vaccination rate are encouraging, the appearance of new variants continues to cast uncertainty," the report noted. Commissioner Sola released early August the Economic Impact of COVID-19 on the Cruise Industry on the East Coast, the last in a series of interim reports issued as part of the ongoing Fact Finding 30 investigation he is conducting.

The report examines direct and indirect economic impacts to ports and cities of Baltimore, Boston, Charleston, New York, Norfolk, Bar Harbor and Portland, Maine. Though none of these cities’ economies relies exclusively on pleasure cruising, collectively, the industry generates more than $1 billion annually to the region.

Progress in achieving high vaccination rates of Americans has allowed the resumption of some cruise operations, continued restrictions on cruise ships calling on Canada from the United States will impact ports in New York/New Jersey, Maine, and Massachusetts, all which serve cruise vessels making northern voyages. Given the short duration of the U.S.-Canada cruise season, it is unlikely these ports will see any voyages between the countries in 2021.

This is the fifth and final in a series of Interim Reports issued by Commissioner Sola examining economic impacts to cities and states resulting from COVID-19 related impacts. Previous reports have focused on Florida, Alaska/Pacific Northwest, Texas/Gulf of Mexico, and U.S. Territories in the Caribbean.

“From region to region and from report to report, we found that the cruise industry is an important part of economies across the United States and confirmed the necessity of restarting this important driver for jobs and revenues,” said Commissioner Sola.

In April 2020, the Federal Maritime Commission voted to authorize Commissioner Sola to conduct Fact Finding 30, an investigation of the economic impact on cruise lines, the ports on which cruise ships call, and the industries that serve these ship.